Yes, that is the point of his book as well -- positive feedback run amuck. Michael Perelman Economics Department California State University Chico, CA 95929
Tel. 530-898-5321 E-Mail [email protected] michaelperelman.wordpress.com -----Original Message----- From: [email protected] [mailto:[email protected]] On Behalf Of Jim Devine Sent: Monday, July 30, 2012 9:57 AM To: Progressive Economics Subject: Re: [Pen-l] wonderful book raghu wrote: > Isn't there a circularity in this process - to use Black-Scholes or > similar models you need to refer back to the price history to estimate > some implied volatility numbers which will then be fed into the > Black-Scholes model to generate prices for new financial products etc? > > The whole process could, in principle, converge to some kind of a > fixed point where prices and model confirm each other, but I'd imagine > these would be highly unstable. that's sort of what MacKenzie argued in the article in the book that I reviewed. -- Jim Devine / If you're going to support the lesser of two evils, you should at least know the nature of that evil. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
